Gold intensifies bearish tilt, testing $1,700

In the Lead: “Raining Pain in Spain”

New York precious metals dealings opened the abbreviated trading week with losses across the boards as Europe-centric angst continued to dominate the psyche of global investors. Near-term gold price prospects have taken a more decidedly bearish tilt and market watchers are now eyeing the $1,680 value zone as a potential first-stop sortie with potential for a visit to the $1,580-$1,600 area still in the cards.

Auerbach Grayson global technical strategist Richard Ross on the other hand, feels (on CNBC last Friday) that given the “double-top” near $1,900 he sees as having been put into place earlier this summer, the premium in gold above its 200-day moving average and the current conditions in the market, the yellow metal could be headed toward the $1,300 target amid a deeper corrective phase. Spot gold started off with a loss of $17.60 per ounce and was quoted at $1,707 this morning but soon retested the $1,700 level as the selling intensified. Silver, ever the ‘leader’ in percentages, fell 3.61% and touched $31.24 per ounce after an overnight low at $30.80 the ounce.

Platinum and palladium lost between 1.5 and 2 percent respectively, and followed the rest of the complex to lower price ground. The former declined $32 to the $1,560 mark while the latter slipped $10 to the $590 per ounce bid level. BNP Paribas analysts opine that platinum’s discount to gold may yet widen as a developing (small) surplus takes its toll along with tepid industrial demand and the aforementioned eurozone fear factor.

Last week, however, it appears that platinum-friendly ETF buyers did make a re-appearance and added more than 38,000 ounces to current balances in the noble metal – the largest such addition to the pile since March. Rhodium was unchanged at $1,675 the ounce. Copper got clobbered and lost 2.4% this morning (falling to a one-month low), crude oil oozed lower towards the $96 per barrel level, and stock market indices flashed ‘loss’ as well.

European markets fell while Dow futures portended a similar (possible 200-point sell-off) outcome for today. Contributing to the pre-Thanksgiving thanklessness in the markets was the expectation that the only “super” thing the US debt-reduction Supercommittee was preparing to announce was a “super-failure” of a stalemate. In a virtual replay of this summer’s finger-pointing festival in DC, the two sides that have been sitting at the negotiation table since August are best agreeing to disagree on basic bullet points that would commence tackling the US’ deficit; outlays and revenues.

One side wants to cut but will not give an inch on higher taxes, while the other will not take the scalpel out unless something is done on the income side of the government’s ledger. If nothing is done in the next couple of days, then ‘automatic’ spending cuts (heavily affecting defense) totaling $1.2 trillion will kick in, come January 2013. It would also make for a heckuva year of election rhetoric in 2012. Already, 42% of the polled American public lays blame for the supercommittee disaster on the GOP and fears further ratings downgrades down the road.

Gold prices fell to under the pivotal $1,700 round figure overnight as further waves of fear-based selling buffeted the commodities markets. The change in Spain’s government did not manage to bolster optimism levels among global investors as newly-elected conservative Mariano Rajoy does not take the country’s helm for another month and as many remain unconvinced that he will succeed where his predecessors failed-in righting the listing Spanish economic and bond market ships. This was the fifth European government to fall in the debt domino series of 2011. For the markets, it’s as if the event did not occur. Worse, the markets see this as Mr. Rajoy’s “mission impossible” and today’s bids bear this out.